I am the Managing Director of MarketWatch Centre for Negotiation Ltd., an associate professor at BMI, CBS-SIMI, former chairman of the Centre for Negotiation at Copenhagen Business School and a speaker and consultant. I’ve written 21 books on the topics of negotiation and business communication and contributed to many mainstream and trade news publications such as the Christian Science Monitor, Inside Supply Management, BusinessWeek.com, IndustryWeek.com, and BusinessInsider.com, among others. Throughout my career, I’ve had the privilege of working with world-class organizations such as Discovery Channel, Microsoft, Canon, Novo Nordisk, ThermoFisher, Rolls-Royce, IKEA, various governments, Unicef, SABMiller and PricewaterhouseCoopers. I am adjunct faculty at Thunderbird University.

Hardball Costs, Generosity Pays

Generosity is an often overlooked negotiation variable that can yield surprisingly positive outcomes.

Although it may seem counter-intuitive, there are many reasons why you want your partners to profit on any transaction you negotiate. In fact, you should insist upon it. When you do business regularly with a vendor, you form a contract with the hope of a mutually beneficial outcome. Most of the time, you want your vendor partners to leave with a positive feeling about the continuation of the relationship.

Yet, many top executives do not think about vendor relations in this light. Greed, or the selfish scramble for their own bottom line results, drives many dealmakers to hardball tactics and one-sided pricing demands that leave the supplier with little or no margin on the deal. In the long run, this strategy does not work. Neither party can succeed without the other—for example, a car manufacturer needs a parts supplier partner and a parts supplier needs someone to purchase his goods. They are not direct competitors and should not act like that during negotiations.

When the greedy negotiator does not enable the supplier to earn a reasonable profit margin, the supplier will eventually stop doing business with the hard bargainer or go out of business. Eventually, the last supplier standing will find himself with the windfall of a monopoly and then he can then name his price.

This is exactly why negotiators need to forgo the costly hardball tactics, and approach it from the spirit of cooperation and collaboration. They should complement each other and show generosity, not compete. By operating from this mindset, both parties strengthen their trust in each other, which then leads to greater overall profits—value I refer to as Tru$t Currency™.

In a recent international content licensing agreement between CBS Corp. and Netflix, generosity was a key component of the deal. CBS and Netflix originally negotiated a limited agreement for international distribution of certain content on the digital platform. The arrangement proved so successful however that CBS chief executive Leslie Moonves eagerly extended the agreement to include additional programming and more jurisdictions. They created a deal that benefited both companies because they recognized they were not competing.

Said Armando Nunez of CBS, “Netflix is a great partner, and this has been a mutually beneficial relationship that has helped grow our respective businesses. It is an arrangement that showcases our premium content on Netflix’s world-class service in a way that complements our traditional worldwide licensing and adds to our overall international revenue.”

Of course, acts of generosity are easier stated than preformed. Some corporate cultures make it almost impossible. But the sophisticated contracts manager will demand that their supplier partners make a healthy profit on the transaction, so that they can continue with beneficial cooperation. Good negotiators are careful not to destroy the good faith that lies at the root of a vendor relationship by not being generous. What Winston Churchill said of battle is equally true in the commercial context: “There is only one thing worse than fighting with allies and that is fighting without them.”

To sum up, when trust is high, performance of the terms of the agreement goes more smoothly and the bottom line is improved. The concept is simple, but its implications are huge. When the trust gap widens, contracting parties make less money. When trust is low, the cost of the sale goes up, the sales cycle lengthens, and gross revenue goes down.

So the next time you are about to negotiate, remember that generosity pays! Putting additional cost on your counterpart is only going to hurt you in the end. Instead, think to yourself what can I do to make this deal beneficial to my partner? As I typically advise my clients, open the negotiation by saying, “I am here today to help you reduce your costs, liabilities and risk and help you increase your profit! At the same time, I hope you can help me do the same.”

Thank you for engaging with me on this blog! Please let me know your thoughts, questions, or feedback by leaving me a comment below. I will do my best to respond to everyone.

Also, there are many other ways to connect with me. Follow me on Twitter, like me on Facebook, or visit www.KeldJensen.com and sign up for my newsletter “Finding SMARTnership.” I look forward to continuing the conversation with all of you.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Thank you reading and contributing that wonderful story of your own. Mutual trust and the sharing of information are the true keys to unlocking the most value in any deal. By opening the communication up with the photographer you were able to ensure he received a fair deal, and probably created a life-long, trusting business relationship in the process.

I’ve enjoyed following your blog, and look forward to more of your posts.

Thank you for a very good article Keld, it seems to work in developed countries i reckon not in developing countries, the same will hit you hard to be generous, however, i tried that in one case and was hit so bad it hit back like a hurricane, but in any case i will keep trying because i believe it will always pay (generosity) it builds trust which in return is more important factor to keep in mind then profits, the profits will come eventually.